Since the start of the year, the NASDAQ 100 has shed almost 25% in value. Although most of the drivers have been fundamental in nature, certain technical levels have been triggered in the process, exacerbating the move lower. We review some of the levels to watch out for in coming weeks for future trading direction.
12,000 – 12,300 range key
Starting with the longer term picture, we think the 12,000 – 12,300 range is key to hold as support to prevent further downside. This level (shown by the weekly chart below) shows multiple occasions when this region was key over the past couple of years.
Back in late 2020, the index tried and failed three times to break the level. When it did, it vaulted significantly higher. This time, it’s being tested on the downside. A break and hold below this price opens up the trapdoor back to the early pandemic days in 2020.
For the moment, on the weekly candles we don’t have a bullish or bearish bias.
Descending channel could indicate short-term upside
On the daily candles, the descending channel from the start of this year is shown below. From this, it does indicate that we could be due a bounce in the NASDAQ 100. If it follows the formation from the middle of March, a swift move in coming weeks back to the 14,000 level can’t be ruled out.
However, although a technical bounce from this territory is warranted, the fundamental picture could take control. If US yields continue to rise then downward pressure would continue to exist, possibly forcing sideways trading.
Overall views and levels to watch
It appears the NASDAQ 100 could be due a bounce in the short-term, as it coincides with both long-term support area in the 12,000-12,300 range and also on the bottom of the channel on the daily charts. However, we don’t expect this to be the complete end of the downward move, so would look to sell rallies that reach 14,000-15,000.